FAQ

The concept of an energy-use ecosystem

Published on by Robert

Summary

A business’s energy use is complex and impactful.  If not dealt with well, if the moving parts of a business’s energy-use ecosystem are not recognized and prioritized, if progress is not made on the priority items, if efforts are ad hoc not connected and synergized, then the combined drag on a business’s success will be substantial.   Meeting this challenge well will result in a business’s energy-use ecosystem become a strength, a competitive advantage for attracting new customers, talent, and investment, and for promoting contentment amongst existing customers, talent, and investors.

The Concept of an Energy-use Ecosystem

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Energy is resource.  A commodity.  It is produced by burning or otherwise manipulating another commodity – coal, oil, gas, uranium, sunlight, gravity, and wind are currently favorites.

Energy use is an activity.  In the business to business context it is a complex activity.  It requires the coordination of hundreds of other activities and resources and systems from fields including finance, contract law, knowledge and risk management, and human behavior, in addition to the fields of engineering and technology that may first come to mind.

Beyond the resource, energy, and the activity, energy use, every business today has an entire energy-use ecosystem, unique unto itself.  A business’s energy-use ecosystem, just like the natural ecosystem students learn about in high school, consists of every way that anything related to energy use does or could affect the business’s success.  Not only the immediately obvious elements such as where the energy it needs is coming from, what technology is in place so that energy is put to use to provide energy services, and what the financial cost is for that energy and that technology, but also the huge number of much less obvious elements all the way out to things like new regulations about putting a price on carbon will do to profits, when the transition away from burning fossil fuel will impact a business’s customers’ ability to  buy its services, and the domino effect of government’s actions in support of the UN Sustainable Development Goals.

This ecosystem has grown much more complex in the past ten years, and seems set to continue on that trajectory.  Energy use now not only affects a business’s ability to continue operating from one minute to the next, and its ability to do that at a profit; energy use now also affects a business’s reputation, its brand, and its ability to satisfy important stakeholders from right across its major stakeholder categories of customers, employees, and owners/investors.

Complexity and impactfulness means that this ecosystem is rich with opportunities to advance the business’s success, but also with risks and threats to diminish that success and negatively affect the career of business executives.

The opportunities and the threats related to a business’s energy-use ecosystem are often two sides of the same coin.  Amongst a business’s full range of stakeholders there are those for whom one or more aspects of energy use can be a hot button – positive or negative.  For example, someone at corporate office or with the investors may be both very attentive to the cost of energy but also insistent that the business participate in industry initiatives to promote electricity supply deregulation.

Failing to fully appreciate the business’s extended energy-use ecosystem may lead managers to make decisions that might leave them looking ill-prepared, a poor judge of risk, or less than astute.  For all these reasons, business managers are well advised to deal competently with the subject.  Both the risk of failing to see a threat and the risk of failing to capitalize on an opportunity will lead to higher-ups asking why.

On the other hand, when this challenge is well met, a business’s energy-use maturity becomes a strength, a competitive advantage.  Its energy-use maturity will contribute to its success in winning in the B2B environment, because energy-use maturity is exactly the sort of attribute the best customers are looking for so they can demonstrate they have good reasons for choosing your business over one of your competitors.  Similarly, energy-use maturity adds appeal when the contest is for talent, for investment – equity and debt both – and for that all-important license to operate that no business can take for granted.  In  short, for success.

Note that a business’s senior management team has no choice but to manage this challenge at the business unit level, because each business has its own combination of location-dependent issues,  job-market dependent issues, and customer-mix dependent issues.  This is not a challenge that can be handled by a head office producing a standard operating procedure.

Dealing with a business’s energy-use ecosystem is, in a sense, more than management.  Management denotes dealing with things under a manager’s control.  Many aspects of a business’s energy-use ecosystem are clearly outside the manager’s control.  But nonetheless there are management skills that can be put to work.  If thinking about and planning to deal with this ecosystem for the first time, the initial goal will be to understand it.  This will include mapping out the range of issues as fully as practicable, and then putting in some rigorous cognitive effort to rank each element with reference to magnitude of impact, likelihood of impact, and time horizon of impact.  This is not easy.  The factors are different for every business, and depend on correctly anticipating the needs of various parties including corporate office management , current shareholders, and even future investors.

The objective of all this effort is to be able do the best possible job of exploiting the opportunities and managing the risks.  And then to get better at doing this over time.

Our use of the word ‘strategy’

Published on by Robert

We consider strategy to be an art. We differentiate strategy, the art form, from its work product, a (the, our, or their) strategy. And while the word strategic is amongst the most popular in the business world, we attempt to use that word only purposefully, to describe something related to strategy or a strategy and not use it as a synonym for important.

Strategy does entail plans and decisions, so it has something in common with tactics and execution. But unlike tactics, these plans and decisions need to be made in light of overall objectives, and those objectives, in turn, need to be made in light of overall purpose.

Strategy as the art of the general is indeed about winning. But it is not about winning as in a military war, where the objective is to end the war. In business the “war” is much more complex, much more about cooperation and collaboration, and intended to be never-ending. No business does last forever, they all evolve into something else or cease to exist, but their leaders work with the intention that they will go on forever.

Some discussants suggest that the war analogy is not fitting, but we consider that the general practicing their art – understanding the situation they are in, gaining new intelligence and insights every minute, needing to make decisions right away and with imperfect and ever-changing knowledge, selecting which resources will be needed in the future and putting plans in place of these resources are there when needed — these are all entirely applicable to today’s business diplomat general. Of course this commanding general is not just one individual — it never was. But thinking of it this way has proven much more beneficial than thinking of it as if no one was in this position, and that disparate silos of information and domain expertise would serve the business better.

Why differentiate between energy and energy use?

Published on by Robert

Summary: Distinguishing between the word energy and the term energy use allows the mind to appreciate that something which is a resource and something which is an action are better referred to using different terms rather than using the same term for both.

Introduction
When becoming newly acquainted with Energy-use Strategy Advisors, people commonly ask two questions. They ask why we use the term ‘energy use’ rather than the single word ‘energy’. And they ask what we mean by strategy. Allow me to address only the first of those questions here. You will find my explanation of the strategy idea elsewhere on this website.

The Word Energy
Energy in the business world is a resource. And a commodity resource at that. It can be stored, bought, and sold. Energy is a resource that allows work to be done. This attribute of providing the potential to do work is also how physicists define energy. Confusingly they also tell us that everything – you, me, an atom, and a far distant star – are all made up entirely of energy. That’s not the definition we are talking about here. The word energy has other meanings, too. People are described as being full of energy, or of not having any energy after a long day at work. Those with a certain view about things spiritual, not physical, also use the term energy to describe some particular phenomenon as they understand them. They refer to healing energy and to energy work, a phrase which physicists must find as confusing as many of us find theirs.

The Term Energy Use
Energy use is a much less complex term. This is one of the reasons we like it so much. It does not mean many vastly different things to different people. It means the action of getting the work done that a business buys all that energy to do. It covers all those activities that occur between energy being a resource, and the work it does leading to some outcome. There is a simple way of looking at this – your business might burn natural gas to release heat that makes your office building habitable in the winter. That is energy use. But there are concentric circles of complexity that can be added to that view, developing into full energy-use ecosystem.

What Is the Value In Differentiating Them
Choosing to use the term ‘energy use’ makes our life a lot simpler. It avoids confusion. We hope it will make your life simpler, too. And in that simplicity, it will be easier to get on with the job at hand, which is to ensure that your organization’s use of energy creates the most possible value for its entire panoply of stakeholders.

Examples of Parallel Cases of Differentiating a Resource and an Action
Business world use of the term ‘energy use’ as a clear and distinct differentiator of an action and a resource is not all that common. In economics and statistics, however, the term is found frequently. And the distinction is not questioned. The term ‘land use’ is even more common in economics and statistics, although again not by the business community with the exception of the agriculture sector. Water and water use are also well understood to be different things.

A Google search will show you ‘land use’ is five times more common a term than ‘energy use’. Perhaps that will change.